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How Muslims behave with Business Partners – Islamic Education

Muslims Relations with Business Partners

Islamic teachings attach great importance to all kinds of relations and partnerships, including business partnerships. All dealings and transactions carried out by the Muslims have to be based on thorough honesty and truthfulness, and in this regard, the Holy Prophet Hazrat Muhammad went to the extent of saying:

"He who cheats is not among us".

By so saying, the Holy Prophet Hazrat Muhammad established a strong link between true faith and honesty in dealings. The Quranic verses and glaring examples from Holy Prophet's why life provide complete guidance about how to establish and promote business partnership. The most fundamental Quranic instruction in this regard is about making agreements in writing, in order to avoid confusion and disputes in future. The verse of Dayn (verse of transactions) says:

"O you who believe! When you deal with each other in transactions involving future obligations in a fixed period of time, reduce them to writing. Let a scribe write down faithfully as between the parties, let not the scribe refuse to write".

We can see that in the modern world, the advice given in this verse is universally acted upon in all forms of agreements made between any two parties.

Islamic education and the Islamic code of conduct has specified certain strict limitations about the nature of various means and modes of earning. Riba or usury, defined in any excess on the principal amount, has been strongly condemned in Islam. The Quran categorically declared:

"God has permitted trade and forbidden usury". (2:275)

"God will deprive usury of all blessing, but will give increase for deeds of charity". (2:275 & 276)

So, any business partnership involving earnings based on usury is forbidden. This is because usury is aimed at increasing the indebtedness of the borrower, and is thus a kind of exploitation of the weak, whereas Islam encourages helping the weak and the poor. Similarly, no such partnership is permissible in which the profit of one partner is guaranteed, but that of the other is not. All such transactions fall in the category of usury. All these transactions that involve ordinary gambling, as well as those that resemble gambling in any form, are also forbidden in the light of the following Quranic verse:

"O you who believe! Intoxicants and gambling, dedication of stones and divination by arrows are an abomination of Satan's handiwork, so avoid them". (5:90)

Thus transactions involving speculations or lottery or any surprise monetary games as well as those related to liquor are not allowed in Islam.

Islam provides effective and beneficial alternatives to these forbidden forms of trade dealings, and they include Mudarbah and Musharekah. In Mudarbah, one partner provides the capital and the other the labour. The partner providing money or capital is called the Sahib al-Maal or the Rabb al-Mall (the financer), while the one providing the labour is called the Mudarib (the entrepreneur).

The financer acts as the dormant partner, and the entrepreneur acts as the trustee and the agent to employ and manage the capital. The Mudarbah agreement can also be consummated between several partners, and the profits or losses are to be shared according to the terms agreed. It was popular during Holy Prophet's time and remained popular among the companions' time as well. Even today in the Muslim world, many banks operate on the basis of the Mudarbah model. Even conventional banks offer such investment schemes.

In Musharekah or Shirkah model, two or more persons contribute to the financing as well as the management of the business, in equal or unequal proportions. Profits may be divided in an equitable ratio agreed upon between the partners, but the losses are incurred in proportion to the capital. Islam also commands us to strictly adhere to and abide by all the terms agreed in the agreement. The Quran clearly says:

"And fulfill every engagement, for every engagement will be enquired into (on the Day of Reckoning)" (17:34)

"One who The Holy Prophet Hazrat Muhammad strengthened this injunction by saying: does not keep his promise has no religion".

Not only this, the Holy Prophet Hazrat Muhammad demonstrated this in his early Makkan life by showing a strong sense of responsibility. There is a mention of a commercial partner of the Holy Prophet at Makka. This man, named Sa'ib reported: "We relayed each other; if Muhammad led the caravan, he did not enter his house on his return to Makka without clearing accounts with me". Such honesty made the Holy Prophet Hazrat Muhammad famous with such honoured titles as al-Sadiq (the truthful) and al-Amin (the trustworthy), and when Holy Prophet Hazrat Muhammad worked with the same honesty for Khadija as her trade agent, she was so impressed that she decided to marry him.

In Islamic mode of business or business partnership, all those methods which harm others are not permissible. Hoarding is one such method. The Holy Prophet Hazrat Muhammad said:

"Hoarding is accursed".

Similarly, any business transaction, the complete details of which are not clear, and on that account is open to dispute, is not valid. According to a saying of the Holy Prophet Hazrat Muhammad

"God's messenger has prohibited a fraudulent and ambiguous transaction".

This means that it is incumbent upon the business partners that they should never keep anything secret from each other, and should make the division of all profits in a transparent and unambiguous manner. Hence, we can see that Islamic injunctions comprehensively and clearly make everything clear regarding trade transactions and partnerships.


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